Ofcom offers further cuts to mobile charges

Telecoms regulator, Ofcom, has today proposed further cuts to mobile phone bills, vowing to lower the charges operators impose to connect calls across networks – known as ‘mobile termination rates’.

Termination rates occur when a consumer calls a mobile phone user on a different network – either from a mobile or a landline – and the network operator they are calling charges a termination cost to the provider with whom they are placing the call.

Ofcom concluded its last review of the market for mobile termination rates in 2011, imposing a control on the rates charged by the four largest network operators. Since then, mobile termination rates have already fallen 80 percent, from 4ppm to 0.8ppm. This represents a significant fall from a decade ago, when termination rates were 14 ppm. This new controls by Ofcom would see termination rates fall slightly further, to less than half a penny per minute by April 2017.

The mobile market has changed significantly since Ofcom last reviewed these charges. The amount of spectrum available to provide mobile services has increased dramatically, following the release of 4G spectrum auctioned by Ofcom in 2013. All four largest mobile operators have now launched competing 4G networks, with each aiming to cover around 98% of the population by next year. These networks are currently used for high-speed mobile broadband, but operators are expected in the near future to start using them for voice calls.

Mobile networks and technologies are also becoming more efficient, leading to lower costs. Ofcom has taken all these changes into account in reviewing termination rates. The new charge controls are designed to ensure that the charges levied by operators reflect these lower costs.

Brian Potterill, Ofcom Competition Policy Director, said: ‘Consumers in the UK benefit from a thriving competitive market, and mobile calls have never been cheaper.’ He said that the average cost of a call bundle has fallen from £40 to around £13 in real terms over the last ten years. ‘We want to ensure mobile users continue to benefit from competition, which will deliver affordable services in the years ahead,’ he added.

The move will affect the UK’s four major network operators: EE, a joint venture between Deutsche Telekom and Orange, Vodafone, Telefonica’s O2 and Hutchison’s Three. Ofcom will publish its final decisions by March 2015.